Sakae Sushi is a restaurant chain from Singapore that specialises in affordable Japanese food served to diners via a kaiten (conveyor belt). Since the opening of its first outlet in 1997, the chain has expanded to over 60 locations across Singapore, Malaysia, the Philippines, Indonesia, China and Thailand. The brainchild of entrepreneur Douglas Foo, Sakae is the flagship brand of Singapore-listed company Apex-Pal.
Background
In 1996, Douglas Foo set up Apex-Pal with a Japanese partner to enter the garment trade. Soon after, Foo began searching for a different business opportunity in which he would have first-mover advantage and a competitive edge. As his wife Yen Khoon had a liking for Japanese food, Foo frequented Japanese restaurants in Singapore and eventually struck on the idea of serving Japanese food at affordable prices.
Despite an economic crisis in Asia at the time and his lack of experience in the food industry, Foo decided that there was a niche for a kaiten (conveyor belt) sushi chain serving Japanese food at affordable, mass market prices and steered Apex-Pal in this direction. His Japanese partner did not agree with the change and withdrew his shareholding, leaving Foo to set up and source for funds for the fledgling business.
After travelling to Japan and Hong Kong to observe and learn from kaiten sushi restaurants, Foo set up the first Sakae Sushi outlet in 1997 in OUB Centre at Raffles Place, in the heart of Singapore’s financial district. “Sakae” was chosen for the name of the outlet as it means “growth” in Japanese and also sounds similar to sake, a Japanese liquor. The 1,300 square foot outlet with seating for 100 customers was an immediate success, and Sakae’s simple price structure proved to be very popular. The majority of sushi dishes were priced at S$1.90 and premium dishes at S$6.50, which made Sakae more affordable than other Japanese restaurants. Sakae’s popularity prompted the opening of a second, 2,900 square foot outlet at the Heeren mall. A third restaurant opened at Wheelock Place in January 1999. Foo had initially planned for six Sakae outlets for the Singapore market, but he soon saw the potential for expansion to suburban areas. By 2002, there were more than 10 Sakae outlets in Singapore, Thailand and Indonesia, with annual revenue of around S$23 million.
Foo also had ambitions to turn Sakae into a major food franchise and “the McDonalds of sushi” worldwide. In 2001, Sakae opened its first overseas outlet in Thailand, a joint venture with a Thai food company and other local partners. By 2002, Sakae was in Indonesia as well.
Public listing
In 2003, Sakae’s parent company Apex-Pal was listed on the Singapore Stock Exchange’s Sesdaq (now named Catalist) market. Apex-Pal’s food businesses, of which Sakae is the flagship brand, represented over 95% of the company’s revenues. In August, Apex-Pal’s Initial Public Offering (IPO) set out 16.5 million shares, of which 836,000 were for public investors and the rest for institutional investors, clients and company employees. The public tranche was 916 times subscribed, which made it the highest share subscription rate in Singapore at the time. On the total offering of 16.5 million shares, the IPO was 47.4 times subscribed.
The IPO brought in about S$3.4 million that was used for new Sakae outlets (and other brands within Apex-Pal) and working capital. By 2006, there were 31 Sakae outlets in Singapore and another 12 in Malaysia, Indonesia, Thailand, the Philippines and China. Net profit was S$3.7 million on revenues of S$51.9 million. This spectacular growth had come about without bank borrowings, with Sakae’s expansion financed initially through Foo’s savings, then earnings and public listing.
Global ambitions and consolidation
Building on Sakae’s ambitions for a global presence, Foo worked to take the brand into neighbouring countries and beyond. In December 2007, Sakae opened its first outlet in the United States at the Chrysler Building in New York, its 61st outlet worldwide. Apex-Pal invested an initial S$3 million in the 3,000 square foot outlet. The outlet has since closed.
Initially, because of the company’s small size, Foo’s strategy for Sakae’s expansion was to enter into franchise agreements. As the company grew (with double-digit revenue growth in the years following its 2003 listing), the company also utilised a strategy of foreign direct investment in countries where this was feasible.
When a global economic crisis struck in 2008 and Sakae found its margins squeezed by higher prices for commodities such as rice, the company froze wages and cut executive pay but decided against mass staff layoffs. A profit of S$2.3 million in 2007 was followed by a net loss of S$3.8 million in 2008 due to outlets operating outside Singapore, rising rentals, and salary and commodity costs. It was Apex-Pal’s first annual loss since listing in 2003. Sakae introduced cost cutting measures such as sourcing for new food suppliers, minimising waste and tightening other operational practices. The company returned to profitability in 2009, posting a S$3.3 million profit on revenues of S$88.8 million.
Use of technology
The use of technology in food preparation and serving has been a signature mode of operation for Sakae Sushi. To avoid the problem of food quality changing when chefs depart, Sakae installs sushi rice rolling machines in each outlet. Together with a central kitchen where ingredients are prepared, this ensures that Sakae’s food is of a consistent quality across the chain.
In Sakae outlets, each table is equipped with a hot water tap for tea refills and a computerised menu where diners can view and order items, which helps customers to track their spending. This electronic ordering system has been patented by Sakae, as has its portable conveyor belt system for food delivery both within restaurants and for outdoor catering. This system, designed in 2000, cost between S$60,000 and S$100,000 to patent and won Spring Singapore’s Innovation Award.
Author
Alvin Chua
References
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The information in this article is valid as at 2010 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.
